Office at home

[veritas]

My client has a transcriptionist business at home where we have claimed office at home expense. Husband is now starting outside sales and will work out of home. My question is can they both use the same space without losing the deductions?

[Gene V]

Ho

According to Pub. 587, page 5. The same home office can be the principal place of business for two or more separate business activities.

I don’t see why a husband and wife couldn’t share the same Home Office.

[veritas]

Thanks for the answer!

[OldJack]

Thanks for the answer!

Exclusive Use

To qualify under the exclusive use test, you must use a
specific area of your home only for your trade or business.

I disagree that husband and wife can use the same office in the home for 2 separate business run separate be each spouse and claim a deduction. I read the exclusive use test and examples to apply to 2 business by your trade or business and not by you and someone else. It stands to reason that only one person can claim a deduction for the one office.

Also, the flow chart on page 4 does not consider 2 people using the same space exclusively.

I would agree that a partnership of 2 people running 2 businesses could deduct one office space. However, I don't think that is what this case is about.

[veritas]

Well, there you go again. Taking a answer I wanted and messing it up with facts.

[Gene V]

Ho

OLDJACK, you could be right, I suppose if each person had there own desk in the same room and just use ½ of the room for there own business, then they could each take ½ of the expense for the room.

[skhyatt]

"Multiple Businesses. A taxpayer can operate two or more businesses using a single home office and still meet the regular and exclusive use requirements. However, each business must separately meet the requirements to sustain the deduction ( Hamacher ; Genck ). Using a home office for employment-related duties could taint the deduction for a self-employment (e.g., a sideline) business. If at least one of the activities fails the Section 280A requirements, no home office deduction is allowed for any activity." PPC 1040 Deskbook

Question is, can two or more people use the same space?

[skhyatt]

TTB, 5-15. "The same home office can be used as the principal place of business for two or more separate business activities. The principal place of of business test is determined separately for each activity."

Again I wonder though, if this would apply to two different people operating two different business activities. In TTB, 5-14, it says "The exclusive use test is met if an area of the home is only used for business." So if two different taxpayers are using the same area exclusively for business, can they both take a deduction? I'm not sure I would feel comfortable taking the deduction for more than one taxpayer. The rules are strict enough for one taxpayer.

[Bees Knees]

Is it even possible for a husband and wife to co-exist in the same office? Wouldn't the first domestic dispute disqualify it as "personal use?"

[Bees Knees]

All of the court cases on the subject deal with one person having more than one business in the home office and qualifying for the deduction provided both businesses meet the office in home requirement.

It is interesting what the court said in one case (Curphey, 73 T.C. 766)

“Respondent's approach of requiring that the home office be the principal place at which the taxpayer's principal business is conducted would disallow otherwise allowable deductions in connection with the use of a home office which is a principal place of business. We do not believe that Congress intended such a result.”

In this case, the IRS tried to argue that the taxpayer had one principal business, and a secondary business. And that since both used the office in home, the office in home should be disqualified. The court basically said there is no requirement that the home office only be used by the taxpayer’s “principal” business, but that each business would otherwise qualify.

Given the fact that the court seemed to be looking at each separate business and whether they each individually qualify for the office in home deduction, I don’t see any problem with carrying the argument over to a husband and wife both using the office, provided each business individually qualifies.

[skhyatt]

Is it even possible for a husband and wife to co-exist in the same office? Wouldn't the first domestic dispute disqualify it as "personal use?"

hehe, good point.

[dyne]

Funny!

Thank you to all of the experts who provide vast knowledge on this board as well as
more humor than I see from comics on TV. Best wishes.

[jainen]

employment-related duties

>>A taxpayer can operate two or more businesses..<<

Isn't a married couple filing a joint return a single taxpayer?

>>Using a home office for employment-related duties could taint the deduction for a self-employment<<

This refers to a court case where the employment-related duties did not qualify for home office because they were not for the convenience of the employer. Therefore it was not exclusive use for the self-employment. In the original post, this might be the case. Outside sales usually means there is another location where you receive referrals, file reports, attend staff meetings, etc.

[OldJack]

>>A taxpayer can operate two or more businesses..<<

Isn't a married couple filing a joint return a single taxpayer?

No...Joint return does not mean a "single taxpayer". Other than Office in the home discussed here we have "a taxpayer" on a joint return in many cases such as qualifying for the §121 ($500,000 v.$250,000) exclusion on sale of residence, each taxpayer must qualify for retirement contributions, etc.

Husband & Wife, with separate businesses, can't both claim the same office space because neither has exclusive use. Likewise, you can't deduct the same expense twice on a joint tax return.

[Bees Knees]

Husband & Wife, with separate businesses, can't both claim the same office space because neither has exclusive use. Likewise, you can't deduct the same expense twice on a joint tax return.

That may be true, but I don't think there is any specific case to point to that says that is true. What is the difference between one taxpayer operating two separate businesses out of the same office verses a husband and a wife each operating separate businesses out of the same office?